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EW and MSC Cost Analysis

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Extended Warranties, Maintenance Service and Lease Contracts

Part of the book series: Springer Series in Reliability Engineering ((RELIABILITY))

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Abstract

A BW is provided by a manufacturer and is included with the sale of a product. An EW may be obtained from the manufacturer, retailer or an independent provider and is an optional purchase by the customer. An EW lasts for a specific period beyond that of the BW and its terms may be identical to those of the BW or they may include additional features for the rectification of product failure such as cost sharing, parts exclusions, cost limits and cost deductibles. The customer may be able to choose a specific type of EW from a set of options being offered by the service provider and then may purchase the EW at the time of the product sale or when the BW expires.

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Notes

  1. 1.

    Another type of cost is the life cycle cost (LCC). This is discussed in Blischke and Murthy (1994).

  2. 2.

    Cost analysis with heterogeneous usage intensity is discussed in Kim et al. (2001).

  3. 3.

    For more on this, see Blischke and Murthy (1994, 1996) and Murthy and Djamaludin (2001).

  4. 4.

    This is the simple diffusion model first proposed in Bass (1969). Since then, the basic model has been extended to take into account other factors, e.g. advertising effort, negative and positive word-of-mouth effects. Details of these can be found in Mahajan and Wind (1986).

  5. 5.

    Cost analysis of several different types of 1-D and 2-D warranties can be found in Blischke and Murthy (1994, 1996).

  6. 6.

    The conditional approach is discussed in Appendix A.

  7. 7.

    These are suboptimal strategies. The characterisation of the optimal strategy is more complex. Jack and van der Duyn Schouten (2000) conjectured the form of the optimal strategy and Jiang et al. (2006) proved that the conjecture was true.

  8. 8.

    See, for example, Blischke and Murthy (1994), Lawless et al. (1995) and Gertsbakh and Kordonsky (1998). Iskandar and Blischke (2003) deal with motorcycle data. See Lawless et al. (1995) and Yang and Zaghati (2002) for automobile warranty data analyses based on this approach.

  9. 9.

    This example is adapted from Bulmer and Eccleston (2003).

  10. 10.

    If the log of the expected times and costs are plotted against I, it is a straight line with negative slope.

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Authors and Affiliations

  1. School of Mechanical and Mining Engineering, University of Queensland, Brisbane, Australia

    D. N. P. Murthy

  2. Dundee Business School, University of Abertay Dundee, Dundee, UK

    Nat Jack

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  1. D. N. P. Murthy
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Correspondence to D. N. P. Murthy .

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© 2014 Springer-Verlag London

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Murthy, D.N.P., Jack, N. (2014). EW and MSC Cost Analysis. In: Extended Warranties, Maintenance Service and Lease Contracts. Springer Series in Reliability Engineering. Springer, London. https://doi.org/10.1007/978-1-4471-6440-1_7

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  • DOI: https://doi.org/10.1007/978-1-4471-6440-1_7

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  • Publisher Name: Springer, London

  • Print ISBN: 978-1-4471-6439-5

  • Online ISBN: 978-1-4471-6440-1

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